9th Circuit allows gaming of Class Action Fairness Act

The 9th Circuit affirmed a lower court order remanding a case that had been removed to federal court pursuant to the “mass action” provision of the federal Class Action Fairness Act (CAFA). Plaintiffs’ attorneys had divided more than 1500 clients among 41 separate lawsuits so that no one suit exceeded the CAFA’s 100-plaintiff threshold. Plaintiffs then filed a petition asking the California state court to coordinate the 41 lawsuits “for all purposes.” Defendants filed to remove the proceeding to federal court, arguing that the petition to coordinate effectively increased the number of plaintiffs above the 100-plaintiff threshold. The 9th Circuit held that the plaintiffs had not proposed that their claims be “tried jointly,” a requirement for removal under CAFA’s “mass action” provision, but merely requested that their lawsuits be coordinated for pre-trial purposes.

Petition to coordinate

In California, coordination of civil actions that share common questions of law and fact is appropriate if assigning all cases to a single judge would “promote the ends of justice” and provide for more efficient handling of the cases. The CAFA, on the other hand, provides for federal court original jurisdiction over “mass actions,” which are civil actions involving common questions of law and fact in which the claims of 100 or more persons are “proposed to be tried jointly.” The only issue before the 9th Circuit was whether the plaintiffs’ petition for coordination was, in substance, a proposal for the cases to be tried jointly, making the cases subject to the CAFA and permitting removal to federal court.

The 9th Circuit observed that a plaintiff’s choice of forum must be given substantial weight, and that courts therefore apply a presumption against removal. Furthermore, plaintiffs are “masters of their complaint” and are permitted to structure them so as to avoid the CAFA threshold. It is well-established, the Court found, that “the plaintiff is, and should be, in control of the selection of the litigation forum.”

The Court agreed with the plaintiffs that their petition for coordination was not a proposal to try the cases jointly under the CAFA. In determining whether a petition to coordinate constitutes such a proposal, a court must examine the substance of the petition and determine whether the plaintiffs are, in fact, proposing a joint trial. In the memorandum supporting the petition to coordinate under California law, plaintiffs’ counsel stated that they anticipated the need for the same witnesses to be deposed in the various matters and the same documents to be produced. The 9th Circuit discerned that the “obvious focus” of the petition and memorandum was on pretrial proceedings.

The defense contended that certain language in the memorandum implied that plaintiffs submitted the petition with an eye toward a joint trial. Most importantly, the memo urged that one judge “hear[] all of the actions for all purposes,” to avoid “inconsistent judgments” and “conflicting determinations of liability.” The Court held, however, that these isolated references to the outcome of litigation could not overcome the memo and petition’s nearly exclusive focus on discovery. Regarding the defense’s contention that references to the ultimate result of the litigation render the petition a proposal for joint trial, the Court wrote “[r]eliance on nine words in the petition to the exclusion of all else is inconsistent with the principle that any doubt about federal jurisdiction be resolved in favor of remand.”